What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-05 compared with 2025-08-06 · 100 added, 62 removed, 328 unchanged (33% of the section changed)

4 unchanged sentences

We are primarily a hotel franchisor operating in 49 states, the District of Columbia, and 47 countries and territories.

As of June 30, 2025, we had 7,481 hotels with 644,400 rooms open and operating, and 931 hotels with 93,218 rooms under construction, awaiting conversion or approved for development, or committed to future franchise development on outstanding master development agreements (collectively, "pipeline") in our global system.

As of September 30, 2025, we had 7,515 hotels with 649,677 rooms open and operating, and 897 hotels with 86,441 rooms under construction, awaiting conversion or approved for development, or committed to future franchise development on outstanding master development agreements (collectively, "pipeline") in our global system.

Our brand names include Radisson Blu®, Park Plaza®, Cambria® Hotels, Ascend Hotel Collection®, Radisson RED®, Radisson Individuals®, Radisson®, Radisson Collection®, Clarion®, Clarion Pointe™, Comfort Inn®, Comfort Suites®, Country Inn & Suites® by Radisson, Radisson Inn & Suites SM , Sleep Inn®, Quality®, Park Inn by Radisson®, Everhome Suites®, WoodSpring Suites®, MainStay Suites®, Suburban Studios™, Econo Lodge®, and Rodeway Inn®.

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Due to the seasonal nature of the Company’s hotel franchising and management business and the multi-year investments required to support the franchise operations, quarterly and/or annual surpluses or deficits may be generated.

During the three months ended June 30, 2025 and 2024, reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs from franchised and managed properties by $9.0 million and $3.1 million, respectively.

During the six months ended June 30, 2025 and 2024, reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs from franchised and managed properties by $29.4 million and $25.7 million, respectively.

During the three months ended September 30, 2025, reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs from franchised and managed properties by $14.8 million.

During the three months ended September 30, 2024, revenue for reimbursable costs from franchised and managed properties exceeded reimbursable expenses from franchised and managed properties by $0.9 million.

During the nine months ended September 30, 2025 and 2024, reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs from franchised and managed properties by $44.2 million and $24.8 million, respectively.

Refer to the Operations Review section in MD&A for additional analysis of our results of operations.

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Operations Review

Comparison of the Operating Results for the Three Months Ended June 30, 2025 and 2024

Comparison of the Operating Results for the Three Months Ended September 30, 2025 and 2024

Three Months Ended

September 30,

(in thousands) 2025 2024

16 unchanged sentences

Interest income (1,435) (2,411)

Other (gain) loss (5,374) 2,544

Gain from an acquisition of a joint venture (100,025) —

Gain on sale of assets (713) —

Loss on extinguishment of debt — 331

Other gains, net (721) (4,013)

Equity in net loss (gain) of affiliates 10,904 (1,310)

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Results of Operations

For the three months ended June 30, 2025, the Company recognized income before income taxes of $108.6 million, which is an $8.0 million decrease from the same period in the prior year.

The decrease in income before income taxes was primarily due to an $8.0 million decrease in operating income and an $8.0 million decrease in the equity in net loss (gain) of affiliates, all of which were partially offset by a $7.9 million increase in other (gain) loss.

Operating income decreased $8.0 million primarily due to a $5.9 million increase in the net reimbursable deficit from franchised and managed properties and a $2.7 million decrease in franchise and management fees.

For the three months ended September 30, 2025, the Company recognized income before income taxes of $210.9 million, which is a $73.8 million increase from the same period in the prior year.

The increase in income before income taxes was primarily due to a $100.0 million gain from an acquisition of a joint venture in 2025, which was partially offset by a $12.2 million decrease in the equity in net loss (gain) of affiliates and a $9.4 million decrease in operating income.

Operating income decreased $9.4 million primarily due to a $15.7 million increase in the net reimbursable deficit from franchised and managed properties and a $10.6 million increase in selling, general and administrative expenses, all of which were partially offset by a $10.4 million increase in other revenues, a $5.5 million increase in franchise and management fees, and a $4.5 million increase in partnership services and fees.

The primary reasons for these fluctuations are described in more detail below.

Franchise and Management Fees

Domestic royalty fees decreased $3.7 million to $121.3 million for the three months ended June 30, 2025 from $125.0 million for the three months ended June 30, 2024.

The decrease in domestic royalty fees was primarily due to a 2.9% domestic system-wide RevPAR decrease as a result of a 1.8% decrease in average daily rates and a 70 basis points decrease in occupancy during the current period, which was partially offset by a system-wide 8 basis points increase in the effective royalty rate from 5.04% for the three months ended June 30, 2024 to 5.12% for the three months ended June 30, 2025.

Domestic royalty fees decreased $4.9 million to $126.7 million for the three months ended September 30, 2025 from $131.6 million for the three months ended September 30, 2024.

The decrease in domestic royalty fees was primarily due to a 3.2% decrease in domestic system-wide RevPAR as a result of a 2.0% decrease in average daily rates and an 80 basis points decrease in occupancy during the current period, which was partially offset by a system-wide 10 basis points increase in the effective

royalty rate from 5.05% for the three months ended September 30, 2024 to 5.15% for the three months ended September 30, 2025.

A summary of the operating performance for the Company's domestic franchised hotels, organized by chain scale, was as follows:

Three Months Ended Three Months Ended Change

June 30, 2025 June 30, 2024

September 30, 2025 September 30, 2024

Rate Occupancy RevPAR Average

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(4) Includes Econo Lodge and Rodeway brands.

A summary of the domestic hotels and rooms by brand in our franchise system as of June 30, 2025 and 2024 was as follows:

June 30, 2025 June 30, 2024 Variance

A summary of the domestic hotels and rooms by brand in our franchise system as of September 30, 2025 and 2024 was as follows:

September 30, 2025 September 30, 2024 Variance

Hotels Rooms Hotels Rooms Hotels % Rooms %

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(3) Includes the Clarion family of brand extensions, including Clarion and Clarion Pointe.

International royalty fees increased $0.5 million to $7.8 million for the three months ended June 30, 2025 from $7.3 million for the three months ended June 30, 2024.

The increase in international royalty fees was primarily due to an increase in the international franchise system size by 48 hotels (from 1,210 hotels as of June 30, 2024 to 1,258 hotels as of June 30, 2025) and 6,858 rooms (from 136,980 rooms as of June 30, 2024 to 143,838 rooms as of June 30, 2025), which was partially offset by a decrease in international RevPAR.

International royalty fees increased $6.2 million to $14.6 million for the three months ended September 30, 2025 from $8.4 million for the three months ended September 30, 2024.

The increase in international royalty fees was primarily due to an increase in the international franchise system size by 77 hotels (from 1,237 hotels as of September 30, 2024 to 1,314 hotels as of September 30, 2025) and 11,612 rooms (from 139,758 rooms as of September 30, 2024 to 151,370 rooms as of September 30, 2025), an increase in royalty fees as a result of the acquisition of the remaining 50% equity interest in Choice Hotels Canada, and an increase in international RevPAR.

Partnership Services and Fees

Partnership services and fees increased $4.5 million due to an increase in the fees generated from the Company's co-branded credit card agreement and qualified vendors.

Other Revenues

Other revenues increased $10.4 million primarily due to an increase in liquidated damages resulting from the early termination of franchise agreements and other franchising revenues.

Selling, General and Administrative

Selling, general and administrative expenses increased $0.6 million primarily due to a $2.0 million increase in operating guarantee payments for a portfolio of managed hotels, which was acquired in connection with the Company's purchase of Radisson Hotels Americas, and general increases in costs to operate the franchising business, all of which were partially offset by a $2.4 million litigation settlement that was recognized during the three months ended June 30, 2024.

Other (Gain) Loss

Other (gain) loss increased $7.9 million primarily due to a $3.1 million increase in the Company's deferred compensation assets based on increases in the fair value of the underlying investments, a $1.5 million increase in foreign currency translation gains, and a $3.2 million unrealized loss on investments in equity securities that was recognized during the three months ended June 30, 2024.

Selling, general and administrative expenses increased $10.6 million primarily due to $1.1 million of expenses to operate Choice Hotels Canada during the three months ended September 30, 2025, a $1.0 million increase in costs related to the global ERP system implementation, and increases in other general costs to operate the franchising business.

Gain from an Acquisition of a Joint Venture

During the three months ended September 30, 2025, the Company recognized a $100.0 million gain on the fair value remeasurement of its previously held 50% equity investment in Choice Hotels Canada as a result of acquiring the remaining 50% equity interest in Choice Hotels Canada in July 2025.

Equity in Net Loss (Gain) of Affiliates

Equity in net loss (gain) of affiliates decreased $8.0 million primarily due to a distribution from an unconsolidated affiliate, which sold its underlying assets, resulting in the recognition of a $7.2 million gain during the three months ended June 30, 2024.

Equity in net loss (gain) of affiliates decreased $12.2 million primarily due to $6.5 million of non-recurring joint venture formation transaction costs associated with the Company entering into a new joint venture agreement, and a new loan facility, to develop and operate Everhome Suites in certain strategic markets during the three months ended September 30, 2025 and a $1.9 million decrease in equity earnings as a result of acquiring the remaining 50% equity interest in Choice Hotels Canada during the three months ended September 30, 2025.

Income Tax Expense

The Company's effective income tax rates were 24.7% and 25.3% for the three months ended June 30, 2025 and 2024, respectively.

The effective income tax rates were higher than the U.S.

The Company's effective income tax rates were 14.7% and 22.9% for the three months ended September 30, 2025 and 2024, respectively.

The effective income tax rate for the three months ended September 30, 2025 was lower than the U.S.

federal income tax rate of 21.0% primarily due to the impact of a $100.0 million non-taxable gain from an acquisition of a joint venture and the purchase of transferable tax credits, all of which were partially offset by the impact of state income taxes.

The effective income tax rate for the three months ended September 30, 2024 was higher than the U.S.

federal income tax rate of 21.0% primarily due to the impact of state income taxes.

Comparison of the Operating Results for the Six Months Ended June 30, 2025 and 2024

Six Months Ended

Comparison of the Operating Results for the Nine Months Ended September 30, 2025 and 2024

Nine Months Ended

September 30,

(in thousands) 2025 2024

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Interest income (4,450) (6,557)

Other (gain) loss (4,938) 3,880

Gain from an acquisition of a joint venture (100,025) —

Gain on sale of assets (713) —

Loss on extinguishment of debt — 331

Other gains, net (5,659) (133)

Equity in net loss (gain) of affiliates 11,035 (9,088)

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Results of Operations

For the six months ended June 30, 2025, the Company recognized income before income taxes of $168.4 million, which is an $11.6 million increase from the same period in the prior year.

The increase in income before income taxes is primarily due to an $11.8 million increase in operating income and an $8.8 million increase in other (gain) loss, all of which were partially offset by a $7.9 million decrease in equity in net loss (gain) of affiliates.

Operating income increased $11.8 million primarily due to a $5.2 million increase in partnership services and fees and a $16.3 million decrease in business combination, diligence and transition costs, all of which were partially offset by a $3.8 million increase in the net reimbursable deficit from franchised and managed properties, a $2.2 million decrease in other revenue, and a $2.5 million increase in selling, general and administrative expenses.

For the nine months ended September 30, 2025, the Company recognized income before income taxes of $379.3 million, which is an $85.4 million increase from the same period in the prior year.

The increase in income before income taxes was primarily due to a $100.0 million gain from an acquisition of a joint venture in 2025 and a $5.5 million increase in other gains, net, which was partially offset by a $20.1 million decrease in equity in net loss (gain) of affiliates.

Operating income increased $2.4 million primarily due to a $9.8 million increase in partnership services and fees, an $8.3 million increase in other revenues, and a $15.8 million decrease in business combination, diligence and transition costs, all of which were partially offset by a $19.4 million increase in the net reimbursable deficit from franchised and managed properties and a $13.1 million increase in selling, general and administrative expenses.

The primary reasons for these fluctuations are described in more detail below.

Franchise and Management Fees

Domestic royalty fees decreased $2.1 million to $215.8 million for the six months ended June 30, 2025 from $217.9 million for the six months ended June 30, 2024.

The decrease in domestic royalty fees was primarily due to a 0.7% domestic system-wide RevPAR decrease as a result of a 0.3% decrease in average daily rates and a 20 basis points decrease in occupancy, which was partially offset by a system-wide 7 basis points increase in the effective royalty rate from 5.04% for the six months ended June 30, 2024 to 5.11% for the six months ended June 30, 2025.

Domestic royalty fees decreased $6.9 million to $342.5 million for the nine months ended September 30, 2025 from $349.4 million for the nine months ended September 30, 2024.

The decrease in domestic royalty fees was primarily due to a 1.7% decrease in domestic system-wide RevPAR as a result of a 1.0% decrease in average daily rates and a 40 basis points decrease in occupancy, which was partially offset by a system-wide 7 basis points increase in the effective royalty rate from 5.05% for the nine months ended September 30, 2024 to 5.12% for the nine months ended September 30, 2025.

A summary of the operating performance for the Company's domestic franchised hotels, organized by chain scale, was as follows:

Six Months Ended Six Months Ended Change

June 30, 2025 June 30, 2024

Nine Months Ended Nine Months Ended Change

September 30, 2025 September 30, 2024

Rate Occupancy RevPAR Average

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(4) Includes Econo Lodge and Rodeway brands.

International royalty fees increased $0.2 million to $14.4 million for the six months ended June 30, 2025 from $14.2 million for the six months ended June 30, 2024.

The increase in international royalty fees was primarily due to an increase in the size of the international franchise system by 48 hotels (from 1,210 hotels as of June 30, 2024 to 1,258 hotels as of June 30, 2025) and 6,858 rooms (from 136,980 rooms as of June 30, 2024 to 143,838 rooms as of June 30, 2025), which was partially offset by a decrease in international RevPar.

International royalty fees increased $6.4 million to $29.0 million for the nine months ended September 30, 2025 from $22.6 million for the nine months ended September 30, 2024.

The increase in international royalty fees was primarily due to an increase in the size of the international franchise system, an increase in royalty fees as a result of the acquisition of the remaining 50% equity interest in Choice Hotels Canada, and an increase in international RevPAR.

Partnership Services and Fees

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Other Revenues

Other revenues decreased $2.2 million primarily due to a decrease in liquidated damages resulting from the early termination of franchise agreements.

Other revenues increased $8.3 million primarily due to an increase in liquidated damages resulting from the early termination of franchise agreements and other franchising revenues.

Selling, General and Administrative

Selling, general and administrative expenses increased $2.5 million primarily due to a $2.0 million increase in operating guarantee payments for a portfolio of managed hotels, which was acquired in connection with the Company's purchase of Radisson Hotels Americas, and general increases in costs to operate the franchising business, all of which were partially offset by a $2.4 million litigation settlement that was recognized during the six months ended June 30, 2024.

Selling, general and administrative expenses increased $13.1 million primarily due to $1.1 million of expenses to operate Choice Hotels Canada during the nine months ended September 30, 2025, a $3.1 million increase in costs related to the global ERP system implementation, a $2.0 million increase in operating guarantee payments for a portfolio of managed hotels which was acquired in connection with the Company's purchase of Radisson Hotels Americas, and increases in other general costs to operate the franchising business, all of which were partially offset by a $2.4 million litigation settlement that was recognized during the nine months ended September 30, 2024.

Business Combination, Diligence and Transition Costs

Business combination, diligence and transition costs decreased $16.3 million primarily due to the termination of the Wyndham acquisition pursuit on March 8, 2024.

Other (Gain) Loss

Other (gain) loss increased $8.8 million primarily due to an $8.4 million unrealized loss on investments in equity securities that was recognized during the six months ended June 30, 2024.

Business combination, diligence and transition costs decreased $15.8 million primarily due to the termination of the Wyndham acquisition pursuit on March 8, 2024, which was partially offset by the transaction costs associated with the acquisition of Choice Hotels Canada that were recognized during the nine months ended September 30, 2025.

Gain from an Acquisition of a Joint Venture

During the nine months ended September 30, 2025, the Company recognized a $100.0 million gain on the fair value remeasurement of its previously held 50% equity investment in Choice Hotels Canada as a result of acquiring the remaining 50% equity interest in Choice Hotels Canada in July 2025.

Other Gains, net

Other gains, net increased $5.5 million primarily due to a net loss of $8.3 million on the sales of equity securities during the nine months ended September 30, 2024, which was partially offset by dividend income of $1.5 million that was recognized during the nine months ended September 30, 2024.

Equity in Net Loss (Gain) of Affiliates

Equity in net loss (gain) of affiliates decreased $7.9 million primarily due to a distribution from an unconsolidated affiliate, which sold its underlying assets, resulting in the recognition of a $7.2 million gain during the six months ended June 30, 2024.

Equity in net loss (gain) of affiliates decreased $20.1 million primarily due to $6.5 million of non-recurring joint venture formation transaction costs that were associated with the Company entering into a new joint venture agreement, and a new loan facility, to develop and operate Everhome Suites in certain strategic markets during the nine months ended September 30, 2025, a $2.3 million decrease in equity earnings as a result of acquiring the remaining 50% equity interest in Choice Hotels Canada during the nine months ended September 30, 2025, and a distribution from an unconsolidated affiliate, which sold its underlying assets, resulting in the recognition of a $7.2 million gain during the nine months ended September 30, 2024.

Income Tax Expense

The Company's effective income tax rates were 25.0% and 24.6% for the six months ended June 30, 2025 and 2024, respectively.

The effective income tax rates were higher than the U.S.

The Company's effective income tax rates were 19.3% and 23.8% for the nine months ended September 30, 2025 and 2024, respectively.

The effective income tax rate for the nine months ended September 30, 2025 was lower than the U.S.

The effective income tax rate for the nine months ended September 30, 2024 was higher than the U.S.

federal income tax rate of 21.0% primarily due to the impact of state income taxes.

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The Company's short-term and long-term liquidity requirements primarily arise from working capital needs, debt obligations, income tax payments, dividend payments, share repurchases, capital expenditures, and investments in growth opportunities.

As of June 30, 2025, the Company's primary sources of liquidity consisted of $587.5 million in cash and cash equivalents and available borrowing capacity under the senior unsecured revolving credit facility.

As of June 30, 2025, the Company was in compliance with all of its financial covenants under its credit agreements and the Company expects to remain in such compliance.

As of September 30, 2025, the Company's primary sources of liquidity consisted of $564.2 million in cash and cash equivalents and available borrowing capacity under the senior unsecured revolving credit facility.

As of September 30, 2025, the Company was in compliance with all of its financial covenants under its credit agreements and the Company expects to remain in such compliance.

The Company believes that its cash on hand, available borrowing capacity under the senior unsecured revolving credit facility, cash flows from operations, and access to additional capital in the debt markets will provide sufficient liquidity to meet the expected future operating, investing, and financing needs of the business.

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We primarily engage in these financial support activities to encourage acceleration of the growth of our Cambria Hotels and Everhome Suites brands.

With respect to these activities, the Company had approximately $667.5 million in financial support of the Cambria Hotels and Everhome Suites brands reflected in the consolidated balance sheet as of June 30, 2025.

With respect to these activities, the Company had approximately $662.8 million in financial support of the Cambria Hotels and Everhome Suites brands reflected in the consolidated balance sheet as of September 30, 2025.

The Company is generally targeting to recycle these investments within a five year period, and expects our outstanding investments to not exceed $1.2 billion at any point in time based on the current board of directors' authorization.

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On March 11, 2024, the Company's board of directors approved an increase of 5 million shares in the number of shares authorized to be repurchased under its share repurchase program.

As of June 30, 2025, the Company had 3.0 million shares remaining under the current share repurchase authorization.

As of September 30, 2025, the Company had 3.0 million shares remaining under the current share repurchase authorization.

The projected 2025 annual dividend rate is $1.15 per share or approximately $53.5 million in aggregate dividend payments, which is subject to future declarations by our board of directors.

Cash Flows from Operating Activities

During the six months ended June 30, 2025 and 2024, the net cash provided by operating activities was $116.1 million and $113.6 million, respectively.

Our operating cash flows increased $2.5 million primarily due to a decrease in business combination, diligence and transition costs associated with the timing of the termination of the Wyndham acquisition pursuit during the first quarter of 2024 and a decrease in the franchise agreement acquisition cost payments, all of which were partially offset by the timing of working capital items.

During the nine months ended September 30, 2025 and 2024, the net cash provided by operating activities was $184.8 million and $236.5 million, respectively.

Our operating cash flows decreased $51.8 million primarily due to the timing of working capital items, timing of cash paid for income taxes as a result of the purchase of transferrable production tax credits, all of which were partially offset by a decrease in business combination, diligence and transition costs associated with the timing of the termination of the Wyndham acquisition pursuit during the first quarter of 2024 and a decrease in the franchise agreement acquisition cost payments.

In conjunction with brand and development programs, we strategically make certain franchise agreement acquisition cost payments to franchisees as an incentive to enter into new franchise agreements or perform-designated improvements to properties under existing franchise agreements.

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If the franchisee exits our franchise system or is not operating their franchise in accordance with our quality or credit standards and is terminated, then the franchisee must repay the unamortized franchise agreement acquisition cost payment plus interest to the Company.

During the six months ended June 30, 2025 and 2024, the Company's net franchise agreement acquisition costs were $41.5 million and $52.0 million, respectively.

During the nine months ended September 30, 2025 and 2024, the Company's net franchise agreement acquisition costs were $62.4 million and $84.1 million, respectively.

The Company’s franchise agreements require the payment of marketing and reservation system fees to be used by the Company for the expenses associated with providing franchise services, such as national marketing, media advertising, and central reservation systems.

1 unchanged sentence

These activities are reflected in revenue for reimbursable costs from franchised and managed properties and reimbursable expenses from franchised and managed properties.

Cash Flows from Investing Activities

The net cash used in investing activities was $95.1 million and $62.0 million for the six months ended June 30, 2025 and 2024, respectively.

During the six months ended June 30, 2025 and 2024, investments in owned hotel properties totaled $65.7 million and $50.9 million, respectively.

The net cash used in investing activities was $177.9 million and $63.4 million for the nine months ended September 30, 2025 and 2024, respectively.

During the nine months ended September 30, 2025 and 2024, investments in owned hotel properties totaled $85.3 million and $81.2 million, respectively.

These investments related to the ongoing hotel development efforts to support the continued growth of the Cambria Hotels and Everhome Suites brands.

During the six months ended June 30, 2025 and 2024, investments in other property and equipment totaled $18.3 million and $22.7 million, respectively.

During the nine months ended September 30, 2025 and 2024, investments in other property and equipment totaled $26.9 million and $33.6 million, respectively.

These investments primarily related to leasehold improvements, office equipment, and capitalized software.

The Company has equity method investments in affiliates related to the Company's program to offer equity support to qualified franchisees to develop and operate Cambria Hotels and Everhome Suites branded-hotels in strategic markets.

During the six months ended June 30, 2025 and 2024, the Company invested $9.4 million and $19.5 million, respectively, to support these efforts.

During the nine months ended September 30, 2025 and 2024, the Company invested $90.0 million and $47.7 million, respectively, to support these efforts.

During the nine months ended September 30, 2025 and 2024, the Company received distributions from these affiliates totaling $44.6 million and $15.9 million, respectively.

During the nine months ended September 30, 2025, the Company received net cash proceeds of $52.0 million from the sale of four wholly-owned Everhome Suites under construction to a joint venture.

Refer to Note 4 for more information.

The Company provides financing to franchisees for hotel development efforts and other purposes in the form of notes receivable loans.

The loans bear interest and are expected to be repaid in accordance with the terms of the loan agreements.

During the six months ended June 30, 2025, the Company issued $3.4 million in notes receivable loans and received $2.8 million in notes receivable loan repayments.

During the six months ended June 30, 2024, the Company issued $1.5 million in notes receivable loans and received $1.7 million in notes receivable loan repayments.

During the nine months ended September 30, 2025, the Company issued $6.4 million in notes receivable loans and received $3.0 million in notes receivable loan repayments.

During the nine months ended September 30, 2024, the Company issued $24.4 million in notes receivable loans and received $2.3 million in notes receivable loan repayments.

On July 2, 2025, the Company acquired the remaining 50% of the outstanding shares of Choice Hotels Canada for a purchase price, net of the cash acquired, of $73.4 million.

The acquisition was funded with available cash and borrowings under the Company's senior unsecured revolving credit facility.

During the nine months ended September 30, 2024, the Company received cash proceeds of $108.1 million from the sale of equity securities.

Cash Flows from Financing Activities

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The Restated Credit Agreement includes customary events of default, the occurrence of which, following any applicable cure period, would permit the lenders to, among other things, declare the principal, accrued interest and other obligations of the Company under the Restated Credit Agreement to be immediately due and payable.

As of June 30, 2025, the Company maintained a total leverage ratio of 2.91x, including outstanding debt of approximately $466.8 million on the senior unsecured revolving credit facility.

As of September 30, 2025, the Company maintained a total leverage ratio of 2.84x, including outstanding debt of approximately $484.4 million on the senior unsecured revolving credit facility.

The Company was in compliance with all financial covenants under the Restated Credit Agreement.

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Additionally, at the option of the holders of the 2019 Senior Notes, the Company may be required to repurchase all or a portion of the 2019 Senior Notes upon the occurrence of a change of control event at a price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest, to the date of repurchase.

During the six months ended June 30, 2025, the Company paid $26.9 million in cash dividends.

Economic Development Loans

The Company entered into certain economic development agreements with various governmental entities in conjunction with the relocation of its corporate headquarters in November 2023.

In accordance with these agreements, as of September 30, 2025, the governmental entities advanced $0.3 million to the Company to offset a portion of the corporate headquarters relocation and tenant improvement costs in consideration of the employment of permanent, full-time employees within the jurisdictions.

These advances bear interest at a rate of 3% per annum.

Repayment of the advances is contingent upon the Company achieving certain performance conditions, which are measured annually on December 31st and primarily relate to maintaining certain levels of employment within the various jurisdictions.

If the Company fails to meet an annual performance condition, then the Company may be required to repay a portion or all of the advances including accrued interest by April 1st following the measurement date.

Any outstanding advances at the expiration of the Company's corporate headquarters lease in 2035 will be forgiven in full.

The advances will be presented in debt in the Company's consolidated balance sheets until the Company determines that the future performance conditions have been met over the entire term of the agreement and the Company will not be required to repay the advances.

The Company accrues interest on the portion of the advances that it expects to repay.

The Company is in compliance with all applicable current performance conditions as of September 30, 2025.

During the nine months ended September 30, 2025, the Company paid $40.2 million in cash dividends.

Based on the current per share dividend amount and our outstanding share count, the aggregate annual dividends for the year ended December 31, 2025 is projected to be $1.15 per share or approximately $53.5 million in aggregate dividend payments.

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Treasury stock activity is recorded at cost in the consolidated balance sheets.

During the six months ended June 30, 2025, the Company repurchased 0.7 million shares of its common stock under the share repurchase program at a total cost, including accrued excise tax, of $100.4 million.

During the nine months ended September 30, 2025, the Company repurchased 0.7 million shares of its common stock under the share repurchase program at a total cost, including accrued excise tax, of $100.4 million.

In total, the Company has repurchased 62.0 million shares of its common stock (including 33.0 million shares prior to the two-for-one stock split effected in October 2005) under the share repurchase program at a total cost of $2.7 billion.

Considering the effect of the two-for-one stock split, the Company has repurchased 95.0 million shares at an average price of $28.81 per share.

As of June 30, 2025, the Company had 3.0 million shares remaining under the current share repurchase authorization.

During the six months ended June 30, 2025, the Company redeemed 0.1 million shares of common stock at a total cost of $9.6 million from employees to satisfy the option exercise price and the statutory minimum tax-withholding requirements related to the exercising of stock options and the vesting of PVRSUs and restricted stock grants.

As of September 30, 2025, the Company had 3.0 million shares remaining under the current share repurchase authorization.

During the nine months ended September 30, 2025, the Company redeemed 0.1 million shares of common stock at a total cost of $9.8 million from employees to satisfy the option exercise price and the statutory minimum tax-withholding requirements related to the exercising of stock options and the vesting of PVRSUs and restricted stock grants.

These redemptions were outside the share repurchase program.

During the six months ended June 30, 2025, the Company received proceeds of $6.4 million from stock options exercised by employees.

During the nine months ended September 30, 2025, the Company received proceeds of $7.5 million from stock options exercised by employees.

Critical Accounting Estimates

1 unchanged sentence

We have discussed the estimates that we believe are critical because they involve a higher degree of judgment in their application and are based on information that is inherently uncertain in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

During the six months ended June 30, 2025, there were no material changes to the critical accounting estimates that were previously disclosed.

During the nine months ended September 30, 2025, there were no material changes to the critical accounting estimates that were previously disclosed.

New Accounting Standards

16 unchanged sentences

foreign currency fluctuations;

variability and unpredictability in trade relations, sanctions, tariffs or other trade controls;

the United States federal government funding lapse and related government shutdown;

impairments or declines in the value of our assets;

23 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis